Recent statements by Federal Reserve (Fed) Chairman Jerome Powell have had a significant impact on the cryptocurrency market. On December 18, 2024, after the Fed cut interest rates by 0.25 percentage points, Powell indicated that due to persistent inflation, only two additional rate cuts are expected in 2025, totaling a reduction of 0.5 percentage points. This prospect of maintaining higher interest rates for an extended period has discouraged investors, resulting in a drop of approximately 4.8% in the value of Bitcoin, which was quoted at around $101,471.
Additionally, Powell stated that the Fed does not own Bitcoin and does not intend to change that position, emphasizing that any legal changes needed to allow such action would be up to Congress. This statement dispelled expectations that the central bank would acquire Bitcoin as part of a strategic reserve, especially after proposals such as President-elect Donald Trump's to create a Bitcoin Strategic Reserve in the US. The Fed's refusal to embrace Bitcoin has contributed to the cryptocurrency's devaluation and increased market volatility.
These statements reinforce the Fed's cautious stance towards cryptocurrencies, negatively influencing the crypto market and increasing risk aversion among investors.
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